United States: CMS Issues Final Regulations To Guide Medicare Providers And Suppliers In Complying With 60-Day Mandate To Report And Return Overpayments

Last Updated: March 1 2016
Article by Jared L. Facher and Brian T. McGovern

Most Read Contributor in United States, September 2017

The Patient Protection and Affordable Care Act ("PPACA"), signed into law on March 23, 2010, included a provision (the "Report and Refund Mandate"), broadly requiring health care providers, suppliers, Part D plans and managed care organizations that were overpaid by the Medicare or Medicaid program to report and return the overpayment within 60 days of the date when the overpayment was "identified."  See PPACA Section 6402(a).  Failure to comply with the Report and Refund Mandate exposes individuals and organizations to liability under the False Claims Act, Civil Monetary Penalties Law, and possible exclusion from participation in federal health care programs. 

On February 16, 2012, the Centers for Medicare and Medicaid Services ("CMS") had issued proposed regulations (the "Proposed Regulations") that outlined steps providers and suppliers were to take when they "identified" an "overpayment."  The regulations, however, were not finalized for the next four years, leaving providers and suppliers without definitive guidance on how to comply with the Report and Refund Mandate.  As we explained in our prior memorandum of August 6, 2015, courts had to fill this regulatory void in False Claims Act cases alleging a violation of the Report and Refund Mandate -- most notably in Kane v. Healthfirst, Inc., No. 11-cv-02325-ER (S.D.N.Y. Aug. 3, 2015). 

On February 12, 2016 -- almost four years to the day the Proposed Regulations were promulgated -- CMS finalized its regulations (the "Final Regulations"), departing in some important respects from its Proposed Regulations and the decision in Healthfirst, but ultimately giving providers and suppliers clearer direction for complying with the Report and Refund Mandate.  See 81 Federal Register 29 at 7654 – 7684.  As detailed below, the Federal Regulations provide that --

  • ·an overpayment has been "identified" to trigger the 60-day clock when a provider [A] has determined, or should have determined, through the exercise of "reasonable diligence," that it received an overpayment, and [B] has "quantified the amount of the overpayment;"
  • ·to report an overpayment, a provider can use a menu of options, including an "applicable claims adjustment, credit balance, self-reported refund, or other reporting process set forth by the applicable Medicare contractor;" and
  • ·the "look back" period for determining what claims need to be reviewed for determining the full scope of overpayments is now six years, not 10 years.

CMS Final Regulations

In our memorandum of March 5, 2012 we analyzed the Proposed Regulations; and in our August 6, 2015 memorandum, we discussed how the federal district court in Healthfirst interpreted key provisions of the Report and Refund Mandate.  In this memorandum, we discuss how those provisions are explicated in the Final Regulations, how the Final Regulations differ from the Proposed Regulations, and how they square with the court's decision in Healthfirst.

When is an Overpayment "Identified" for Purposes of Triggering the 60-Day Report and Refund Mandate?  The Proposed Regulations provided that an overpayment is "identified" when a provider has "actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment," which tracks how the term "knowing" is defined under the Federal False Claims Act.  CMS suggested that the 60-day clock commenced once the provider had identified the existence of an overpayment, if not the exact amount

For its part, the court in Healthfirst embraced the definition urged by the Government, that an overpayment has been "identified" when a provider has determined, or should have determined through "reasonable diligence," that it has received an overpayment.  Significantly, the Healthfirst court did not address whether, beyond determining that the provider has been overpaid, the provider had to also determine the amount of the overpayment to trigger the 60-day Report and Refund Mandate. 

The Final Regulations essentially adopt the "reasonable diligence" standard relied on in Healthfirst, but clarify that "reasonable diligence" needs to be undertaken only when a provider "obtains credible information concerning a potential overpayment."  Thus, a mere allegation or suspicion that a provider may have been overpaid, lacking "credible information", would not compel a provider to undertake an investigation.  Whether information is "credible" then requires an initial threshold judgment call on the part of the provider.

Moreover, the Final Regulations go one step further in clarifying when an "overpayment" has been "identified" -- when a provider [A] has determined, or should have determined, through the exercise of "reasonable diligence," that it received an overpayment, and [B] has "quantified the amount of the overpayment."  Therefore, the Final Regulations contemplate that the overpayment is "identified," and the 60-day Report and Refund Mandate begins to run, after both the amount and fact of an overpayment has been determined.  This clarification will give comfort to providers that they need not rush to make an initial self-disclosure after concluding that it had been overpaid, and can wait until it completes its "due diligence" investigation to determine the magnitude of the overpayment amount. 

On the other hand, a provider cannot avoid or delay the Report and Refund Mandate by not performing any investigation:  the 60-day time period to report and return an overpayment begins when "either the reasonable diligence is completed or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment."  If no investigation is performed, then the 60-day clock starts as soon as the provider has received "credible information" of an overpayment. 

How long does a provider have to perform a "due diligence" investigation?  Both the guidance in the Proposed Regulations and the court in Healthfirst advised that providers should act with "deliberate speed" -- a nebulous standard -- to identify whether an overpayment exists after they receive information of a potential overpayment.  In a sharp departure, the guidance in the Final Regulations instructs that providers have "six months" to undertake a "timely, good faith investigation of credible information," absent extraordinary circumstances.  In other words, once a provider receives "credible information" that it may have been overpaid, the provider has up to six months (absent extraordinary circumstances) to then verify that an overpayment was received and to quantify the amount.  Consequently, a provider potentially has a total of eight months to comply with the Report and Refund Mandate (six months for timely investigation and two months for reporting and returning). 

Notably, the six-month allowance to conduct and complete "due diligence" would not have changed the analysis in Healthfirst, where the government alleged that the provider had not adequately investigated or returned the apparent improper Medicaid claims in over two years since the whistleblower had shared a spreadsheet pointing to those claims. 

Note, however, that the 60-day clock to report and return the overpayment commences once the due diligence is complete and the overpayment has been verified and quantified -- which could be at any point within the six-month timeframe.  Thus, the 60-day Report and Refund Mandate is triggered at essentially the earlier of the date of completion of the investigation or the expiration of the six months, absent extraordinary circumstances.

What needs to be reported, and to whom?  Both the Proposed and Final Regulations include specific details as to what information needs to be reported to comply with the Report and Refund Mandate.  However, the Final Regulations provide greater flexibility about how and to whom the overpayment should be reported.  Unless a provider is making a disclosure under the OIG's Self-Disclosure Protocol (in the case of suspected fraud) or the CMS Voluntary Self-Referral Disclosure Protocol (in the case of a Stark Law violation), the provider can use an "applicable claims adjustment, credit balance, self-reported refund, or other reporting process set forth by the applicable Medicare contractor" to report an overpayment. 

How Far Back in Time Do Providers Have to Look for an Overpayment?  The Proposed Regulations called on a provider to investigate potential overpayments within 10 years of the date an overpayment was received -- the outside limitations period for a False Claims Act violation.  The Final Regulations reduce this time period to six years.  CMS explained that the shorter, six-year period addressed providers' concerns about the burden of investigating claims over a 10-year look back period. 

Does "Reasonable Diligence" Only Take "Six Hours"?  In the Proposed Regulations, CMS estimated that it would only take a provider approximately 2.5 hours or $92.75 of expense, utilizing accountants, auditors, and in-house administrative personnel, to comply with the Report and Refund Mandate.  In an apparent "concession," in the Final Regulations, CMS now estimates that the "per report" burden to providers to be 6 hours, at the expense of $322.22. 

While CMS estimates the investigation should take only six hours, CMS allows up to six months to conduct the investigation to determine the amount of overpayment.  Respectfully, these numbers do not add up.  It is hard to imagine how any provider, charged with reviewing claims over a six-year period to determine the scope and amount of overpayment, would only need six hours to conduct a proper investigation.  It is likewise highly questionable that telling the OIG, or DOJ, that you spent a total of six hours -- albeit consistent with CMS' expectations -- to ascertain the full extent of potentially six-years' worth of overpaid claims, would convince the authorities that you have engaged in "reasonable diligence," so as to avoid potential liability under the False Claims Act. 

Key Takeaway:  Implement, and Document, Proactive & Reactive Compliance with the Report and Refund Mandate:  With the regulations now final, providers are afforded clearer instruction on how to comply with the Report and Refund Mandate.  Notably, in the guidance to the Final Regulations, CMS states that "reasonable diligence" includes both [1] "proactive compliance activities . . . to monitor for the receipt of overpayments" and [2] investigations in response to "credible information of a potential overpayment."  Accordingly, this guidance reaffirms that providers and suppliers must implement effective compliance programs to also detect and uncover overpayments that may be received. 

In either circumstance, CMS encourages providers to "maintain records that accurately document their reasonable diligence efforts to be able to demonstrate their compliance with the rule."  Failing to document one's steps may expose a provider to the charge that it has not undertaken the required compliance activities or "good faith" investigation, or, as alleged in Healthfirst, has done "nothing" to address possible overpayments in the face of credible information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.